Softer same-store sales do not, however, mean that restaurant openings are also on the decline. In fact, as interest rates remain low and investors eye strong yield potential in the restaurant industry, new restaurants continue to open their doors. The pizza segment experienced the most significant growth through Q2 with a same-store sales increase of 3.6 percent, led by Domino’s for the seventh consecutive quarter, reporting a 6.5 percent increase through Q2. What’s contributing to Domino’s success? It could be a combination of added healthy menu options, late-night traffic, their new loyalty program gifting free pizzas to customers with a certain amount of points, and the newly unveiled “no click ordering” on their branded app.

At 1.5 percent growth, the quick-serve segment was the only other sector to report same-store sale increases exceeding 1 percent through Q2. At the forefront of the quick-serve segment are Sonic and McDonald’s, reporting same-store sales of 3.7 percent and 3.5 percent, respectively. By adding touchscreens for ordering and payment in stores and focusing on their social media marketing, Sonic has enhanced its competitive edge in the space. Meanwhile, McDonald’s expanded their all-day breakfast menu and implemented new technology to improve accuracy at their drive‑thrus.

A stark contrast to the 4.7 percent growth posted for fiscal year 2015, the fast casual segment reported a 0.2 percent decrease in same-stores sales through Q2. Chipotle’s 26.5 percent decrease is working against the average as the brand seeks to win back customers through their new loyalty program and burger concept. Winners of the fast casual segment through Q2 were Wingstop and Shake Shack, reporting increases of 7.9 percent and 6.9 percent, respectively. Targeting younger demographics, Wingstop added social media to their online order options. Shake Shack looked to attract customers by adding a chicken sandwich to their menu.

Commodities and cost of sales

Cost of sales decreased across all segments through Q2 by an average of 0.7 percent, primarily as a result of declining commodity costs. Most notably, higher beef supplies pushed costs down by 10 percent through Q2. Some restaurants—including Taco Bell and Wendy’s—are taking this opportunity to offer customers new promotions and menu items.

Labor costs

Labor costs increased across all segments for the second consecutive quarter most significantly in the fast casual segment. Between the Department of Labor’s new overtime rules, certain states’ minimum wage hikes and more stringent labor laws, reducing labor costs are top-of-mind across the industry. Being proactive in restructuring exempt positions will better position restaurants to reduce labor costs while battling lower same‑store sales.

Looking ahead

As the industry grows increasingly saturated and uncertainty around the potential impacts of new labor regulations drives slower same-store sales, the fight to capture consumer dollars remains heated. Winning restaurants are adjusting their strategies to appeal to their target customers’ dining habits, from how they make food decisions to their ordering and delivery preferences. For instance, knowing that Millennials seek inspiration for dining on social media, some brands are allocating more resources to building out their social media offerings. Others are considering the attractiveness of their store locations or are looking to invest in in-store technologies to improve processes and customer satisfaction.

As always, the restaurant sector remains a fast-moving business, and it’s clear that those at the front of the pack are companies demonstrating creativity, nimbleness and an entrepreneurial spirit—all necessities in a time of tight resources and growing costs.